Equinox defends Citadel price

Equinox Minerals
chief executive
Craig Williams
says the idea his company is not paying enough for copper rival
Citadel Resource Group
is due to the target’s large cash holding.

Equinox’s offer of one of its shares for every 14.3 Citadel shares, plus 10.5¢ a share cash, values Citadel at 52.2¢ a share – a 21 per cent premium to its 10-day volume weighted average price.

But Mr Williams said looking at the deal from this perspective was misleading. He said Citadel’s recent $262 million capital raising should be taken into consideration.

“Between a quarter or a third of the value of the market capitalisation of the company was cash and you would not normally pay a premium on cash," he said. “The way we’ve structured the deal, we’re paying them 10.5¢ [a share] cash, which is in effect returning the cash that was raised."

Mr Williams said Equinox was paying a 27 per cent premium on the value of Citadel’s underlying assets, within the 25 to 30 per cent range used as a rule of thumb by mining companies in takeovers.

An independent expert will not be engaged to provide an assessment of the Equinox offer. However, a report prepared by Grant Samuel in September valued Citadel’s flagship Jabal Sayid copper and gold project in Saudi Arabia at $US650 million to $US750 million.

Market sources said a fair value for the company’s other projects in Saudi would be about $US100 million. Mr Williams flew to New York yesterday to meet with shareholders and analysts and explain the rationale behind the transaction.

He said the vast majority of people he had spoken with had been supportive of the deal. Sydney-based broker Petra Capital has been a lone voice warning Citadel shareholders against accepting.